Heat Pump Sales Depend on Area, Fuel Prices

Contractors Share Regional Market Experiences

Tax season is behind us and for many it is now the season of refunds. Armed with varying sums of money they didn’t have a short time ago, many consumers are out there looking for something to buy. Vacations and frivolous impulse purchases are at the top of some lists, but others are looking to invest in energy-efficient products that save money and help improve the value of their home. One of the prime investments in home improvement is the HVAC system, and one of the options that many contractors are offering to their customers is the heat pump.

Are Heat Pumps Right For Your Customer?

A key aspect that contractors can consider to determine whether or not a heat pump is the right choice for a customer is their region. Ambient temperatures and how far they range can render a customer the perfect candidate for a heat pump solution — or set them looking for other, more fitting equipment.

Travis Smith is the general manager of Sky Heating & AC, a residential contracting firm in Portland, Ore. His company is installing approximately three heat pumps to every one air conditioner in retrofit applications and is at about 50 percent when it comes to new construction.

“We have seen a huge increase in the sale of heat pumps. With the efficiencies rising and most Oregonians seeing little need for an air conditioner, a heat pump is a great option,” he explained. “In Portland we are a perfect climate for air-source heat pumps due to our averaging around 47˚ and we rarely go below freezing.”

According to Smith, two-stage equipment is prevalent in his area because the cooling and heating loads are different, a problem he said is solved with the multistage equipment.

In upstate New York, the story is different. Heat pumps are less than 5 percent of sales at Isaac Heating & Air Conditioning Inc. Working across Rochester, Syracuse, and Elmira, N.Y., the company faces winters that regularly drop into the low 20s and below, increasing the cost of operation.

“We also have fairly high electric rates as compared to other parts of the country,” said Eric Knaak, vice president of operations at Isaac Heating & Air Conditioning Inc. “Rochester is in the 13 to 14 cents per kilowatt hour [kWh] range.”

Knaak did mention that there are some areas that have their own utility companies making the price for electricity closer to 8 cents per kWh.

“For those communities it works out,” he said. “Most of the heating in this area is with natural gas. The a/c season is fairly short as well.”

Consider More Than Temperature

Like Knaak, many contractors find that it is not always the climate region, but the cost that can be prohibitive to owning a heat pump. There are two major cost centers around the heat pump; initial investment and operating cost.

Heat pumps account for only one-third of Skip Ronan’s business in Scituate, Mass. “The economy has made it tougher for people to make the additional initial investment in heat pumps,” said Ronan, CEO and owner of Abell Mechanical Inc. “The upcharge to move an a/c job into a heat pump can be significant depending on the size and optional features.”

Ronan consistently offers the heat pump option to his customers, but leaves the decision up to them.

“We have a lot of customers who burn oil for heating purposes and those customers, as well as those who burn LP [liquid propane] gas, are the most likely to purchase a heat pump.”

The second cost center is the operating expense. Depending on the area and the fuel, the operating cost savings of a heat pump can at times help offset the higher rate of initial investment. Where natural gas is abundant, there is not as much urgency for a homeowner to purchase a heat pump. In areas where supplies are limited and other sources like electricity, propane, and oil are used, the returns on heat pump investment can often be seen quickly.

The main selling point, according to John McCarthy Sr., president of an Omaha, Neb., contracting firm, is not always the amount of money invested or saved. “Heat pumps provide even heat, and they save money. More are concerned about money, but comfort is an easy selling point,” he said. “As the cost of energy changes over the years, installations with dual fuel have the ability to adjust to which fuel costs less. That is a true benefit of a heat pump.”

Sidebar: Regional Heat Pump Accounts

Heat pump stories vary as climates and fuel prices vary across the nation. Below are some regional heat pump accounts of what contractors are experiencing in their areas.

Sun City, Ariz.

“We sell heat pumps every day, and the sales seem to be the same as they have been over the last few years. The Southwest is a perfect climate for a heat pump.”
— Willy Rodriguez, branch manager
Service Experts of Phoenix

Kill Devil Hills, N.C.

“Ninety-nine percent of our business is heat pumps. Being where we are, customers rarely request a furnace. If they did, they would have to use propane.”
— Brian McDonald, general manager
Outer Banks Heating & Cooling

Winter Haven, Fla.

“There hasn’t been an increase in heat pump sales, but 95 percent of our business comes from them. It has been a slow economy in Florida and consumer financing is nonexistent.”
— Joe Strickler, president
Refrigeration & Electric Service Inc.

Greenwood, Mo.

“I bid heat pumps each day. With natural gas going down to the lowest it has been in 15 years, I sell more ground-source and less air-to-air heat pumps.”
— Eric Kjelshus, owner
Eric Kjelshus Energy HVAC

Twin Falls, Idaho

“We install heat pumps on an almost weekly basis. The company has seen an increase in sales over the last few years, and I think the price of propane and fuel oil is probably the biggest reason why.”
— Larry Featherstone Jr., president
Home Heating & A/C Inc.

Aurora, Colo.

“We don’t sell many heat pumps because our natural gas is cheap at about 70 cents per thermal unit, including taxes and add-on fees.”
— Alex Walter, CEO
About Home Comfort Inc.

San Jose, Calif.

“In our area, heat pumps are not that popular since natural gas is still cheaper to use than electric. However, we do sell a fair amount of heat pumps when a client has a solar photovoltaic array that generates electricity for them.”
— Russ Donnici, president
Mechanical Air Service Inc.

Sidebar: They Asked for It

What do contractors hope to see in the future from heat pump manufacturers? The NEWS surveyed a large group of contractors to find out. Here are a few of the requests they made.

• We need lower noise level options. Ductless heat pumps are in the 50 dB and below range while conventional equipment is in the high 60 to low 80 dB ranges.

• Shorten the warranty. We have to make money selling parts. Ten years is crazy; five was bad enough.

• We really like the four-wire plug-and-play between the thermostat, indoor, and outdoor units. It would be nice to have this on lower tier units.

• The defrost systems need to be more dependable, effective, and warn a customer of a problem before the unit becomes a huge chunk of ice. It is virtually impossible to remove in the deep cold of winter.

• Make the indoor wall units easier to connect to line sets and electricity. The connection points are too compact, hard to access, and work within. There should be an electrical cable with outer jacket rated as conduit that may be used between the indoor and outdoor units.

• Inverter technology incorporated in the design with its associated super high efficiency.

• More choices of variable-speed compressor (inverter) containing units so we can hit more price points; and smart controls that allow access via web and smartphone apps.

• Design changes to make heat pumps easier to service.

• Easier access to the reversing valve.

• Reduce the physical size. The units are so tall that technicians have to remove the outdoor coil to replace the accumulator, reversing valve, or compressor because they cannot reach far enough down into them to do it with the coil in place.

• Better insulation. All brands tend to sweat in our steamy Florida climate when not installed in conditioned space.

Is there something you would like to change? Do you have a solution to any of the above problems? Join in the conversation at www.facebook.com/achrnews.